How do you apply the Net Present Value rule when multiple projects are available and you have the added constraint of accepting only one project?

Q: How would you compare two different projects using the net present value method?

A: Net Present Value: It is the present worth of the project's initial cost and the cash flows.  Hence…

Q: c) d) Which project(s) would you select if you used the IRR methods. Why? If these were mutually…

A: Answer C: Project B should be selected as it has a higher IRR.

Q: How can we Evaluate a Single Project: For a simple investment?

A: Following are the ways in which a single project can be evaluated: Present worth: Present worth is…

Q: Which of the following best explains the limitations of usin discount rate for evaluating projects?

A: Note: 'Since you have asked multiple questions, we will solve the first question for you. If you…

Q: True or False If several independent projects are considered, the one(s) with the highest PIs…

A: If several independent projects are considered, the one(s) with the highest PIs should be chosen...…

Q: Provide an example of a “good” externality, that is, one that increases a project’strue NPV.

A: The question is based on the concept of externality in project management. Externality is define as…

Q: Is there any reason to believe that the project with the lower payback period is the better project?

A: Payback Period: It is the period in which the cost of the project is recovered. Hence, the shortest…

Q: What would you recommend if the benefit / cost ratio is >1: Select one:   a. Benefit/cost ratio…

A: In very long term projects of government and social nature Benefits/cost ratio is considered.

Q: The benefit cost ratio must be greater than or equal to ______for the project to be economically…

A: The Benefit-Cost ratio is found by Dividing the Net Present Value of Benefits of the Project by the…

Q: Answer this question as it is pertaining to two MUTUALLY EXCLUSIVE projects on the following figure.…

A: IRR internal rate of return is where net present value is zero.

Q: What is the NPV decision rule for discretionary mutually exclusive projects? A. Accept the project…

A: There are two types of projects: Independent projects. Mutually exclusive projects. Independent…

Q: What will happen to the internal rate of return (IRR) of a project if the discount rate is decreased…

A: IRR is the rate where the NPV of the project is ZERO

Q: When faced with a set of independent projects, one should select (choose the best answer) Group of…

A: There really are two categories of capital investment projects: independent projects which do not…

Q: What factors verify that the project is marginally acceptable?

A: Capital budgeting decisions are generally taken for long-term purposes that are irrevocable.…

Q: The overall rate of return needs to be checked for multiple mutually exclusive projects when only…

A: When decision has to be made while comparing one project with other projects and out of which only…

Q: How can the working-capital requirements significantly reduce a project's profitability or rate of…

A: More risky investments would bring about more returns. In this manner, an organization with high…

Q: Why is the original cost estimate corrected based on buyout data?

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: When faced with a set of independent projects, one should select (choose the best answer) A. all…

A: The net present value (NPV) approach calculates the current worth of all future cash flows generated…

Q: How will you choose between two mutually exclusive projects which do differs in terms of their…

A: An investment appraisal is a capital budgeting technique that helps to analyze a proposed project's…

Q: It is good to compute first the additional benefits that a project can give and the additional cost…

A: Meaning of the given options:: a) Law of supply and demand- The law of demand states that when price…

Q: Would you expect an abandonment option to increase or decrease a project’sexpected NPV and risk (as…

A: Net present value (NPV) is the contrast between the present value of money inflows over some…

Q: f the projects are mutually exclusive, highest payback period project will accept normally. a. True…

A: Payback period is the time it takes to recover the cost of an investment

Q: You are considering a new project that will result in additional sales of an       existing project…

A: When evaluating a capital project, expert should use incremental cash flows of the project to…

Q: When faced with a set of independent projects, one should select (choose the best answer) a. all…

A: The net present value (NPV) approach calculates the current worth of all future cash flows generated…

Q: What is crossover rate and why is it important when evaluating two projects?

A: The process through which a company evaluates possible big projects or investments is called capital…

Q: In which situation are the project lives unequal?

A: Answer: A business will face a situation where multiple capital projects display a positive net…

Q: Explain why NPV is generally preferred over IRR when choosing among competing or mutually exclusive…

A: When using the net present value method of selecting from various investment projects: the cash…

Q: According to the Discounted Payback method, which project should be selected? What is the chief…

A: According to the given information, Project D is said to have lesser discounted payback period…

Q: When making decisions, will there be problems with the IRR method for choosing which project to push…

A: Capital budgeting techniques include: Payback Period Discounted Payment Period Net Present Value…

Q: Which of the following is not a criterion that is used to determine whether a project is acceptable…

A: A project is accepted when NPV is greater than or equal to zero. If NPV is Negative then the project…

Q: In calculating the Net Present Value, the project would be acceptable if the outcome was: Group of…

A: The net present value is calculated as the difference of present value of cash inflows minus present…

Q: Beside the dollar cost, what other costs should you consider when comparing alternative solutions to…

A: There could be lot of factors which are to be considered while comparing alternative solutions to a…

Q: What are some possible reasons that a project might have a high NPV?

A: The question is based on the concept of capital budgeting techniques. The Net present value (NPV) is…

Q: a. Compute the net present value of each project. b. If the company accepts all positive net present…

A: Net present value = - Initial outlay + Present value of future cash flows.  Net present value is…

Q: Do NPV and IRR always yield the same conclusion (accept or reject a project)? If not, when do they…

A: Net Present Value is the difference between present value of cash inflows and present value of cash…

Q: On the basis of the NPW criterion, which project would be selected if you use an infinite planning…

A: Net Present Value: It is the present worth of the cash flows of the project for a company.…

Q: What is the process of economically evaluating a project's desirability?

A: Project desirability is the desirability that differentiates the project from other ordinary…

Q: Describe the Incremental Analysis for Cost-Only Projects?

A: The incremental cost is the additional cost incurred for producing an additional one unit of a…

Q: What type of projects does the Payback method favor?

A: Payback method: It implies to a method of evaluating investment projects by computing the time, it…

Q: What is Project A's NPV? Do not round intermediate calculations. Round your answer to the nearest…

A: Net Present Value: It is the present worth of the project's cash flow. It is calculated by reducing…

Q: Dis benefits are the future costs of a project that are paid out of its benefits Select one: True…

A: Dis benefits are the estimated costs that can occur in the future while performing the project.…

Q: Consider IRR for a Nonsimple Project: Mixed Investment?

A: Answer: Mixed investment is an investment during the investment period in which a company borrows…

Q: When faced with a set of independent projects, one should select (choose the best answer) all…

A: Positive NPV occurs only when the present value of all inflows is greater than the present value of…

Q: Why do we need to use the incremental analysis when comparing mutually exclusive projects?

A: Mutually exclusive projects are the projects which compete with each other. In a company which has…

Q: .When using the NPV method the decision making rationale includes the following (select all that…

A: NPV : it the difference between PV of cash inflows and PV of cash outflows.

Q: Describe one advantage and one disadvantage of the NPV methodology of evaluating proposed projects

A: The net present value of the NPV technique is that it considers the essential thought that a future…

Q: Which technique would you prefer out of NPV and IRR if the projects were independent projects and…

A: Net Present Value: It is the difference between the present values of cash inflows and cash…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.